An Exposure Driven Approach Part 3 – Platform vs. Product

On September 20, 2012, In Claim Liability Operations, By VMG

Background

In parts 1 and 2 of our series, “An Exposure Driven Approach we examined how the liability claim exposure model is the foundation for both claims management, organizational efficiency and structure. In this article we look at how the claim exposure model can also be used as the driving element of the liability decision support system, and how that system can utilize the exposure model to provide an organization’s claim representatives with the right tools at the right time to maximize claims handling effectiveness.

To understand the concept of the liability decision support system as a platform rather than a product, it is helpful to view the liability decision support system not so much as a simple claims handling mechanism but rather as a system that is designed to collect and organize claim information on a continuing basis. This type of information can then be used to develop ongoing claim exposure models. On the basis of those exposure models the proper analytical tools (resource profile) can be provided to the claim representative for the most expeditious and advantageous settlement of the claim.

Elements of Exposure

To accurately model exposure prediction levels on a continuing basis throughout the lifecycle of a claim, the liability decision support system needs to be able to assess all of the individual factors which contribute to the overall exposure level of the claim. These factors can change over time, and changes to any of them can affect the predicted exposure level. The liability decision support system must continuously assess and respond to any changes with updated claim exposure predictions and toolbox resource requirements. Exposure factors fall within four general areas – general claim, injury specific, medical information and negotiation factors (not all claims will have factors / information within all areas).

General Claim Information

There are a number of factors and variables that are considered in the prediction of exposure and can dictate the resource profile for the claim, for example:

Age of the claim – Older higher exposure claims may require more resources, for example, they may require the claims representative to do additional investigation as well as include expert analysis. Additionally, they are more likely to be attorney represented / litigated.

Location of the claim – Exposure potential is affected by the locality of the claim, for example the likelihood of large jury awards. Medical costs are also affected by the location of a claim.

Mitigating and/or contributing factors – These are important to the claims representative’ evaluation of the claim for both the insured and the claimant.

Claimant specifics – For example occupation, age, earning level / potential, health status, credibility and reliability, history, etc. can affect the exposure and ultimate outcome of the claim.

Nature of claim / components – Nature of loss, injury, injury factors, medical specials, pain and suffering, self-represented, attorney represented, etc. from a historic perspective are key elements of exposure prediction.

Injury Specific Information

As we look at the dimensionality of a claim and the going exposure prediction, injury information developments become a primary predictor of overall exposure for example:

Initial injury assessment – Ambulance, hospital, diagnostic and treatment records at time of injury.

Injury and medical record evaluation – Subsequent treatment and diagnostic records and component evaluations exposure key predictors for claim exposure development.

Mechanism of injury – Assessment to insure treatment is consistent with diagnosis and no preexisting conditions, degeneration etc., are present or receiving treatment.

Treatment utilization – Progress assessment versus authorized medical specials to insure treatment numbers and payments within normal range.

When looking at a claim from a multidimensional perspective, exposure deviations, severe factors, injuries diagnosis or sudden changes in medical specials during the life of claim can be used and change the profile of a claim in the liability decision support system / platform. Claims with severe injuries at initial filing, or claims where medical specials suddenly spike or otherwise exceed the normal predicted exposure level will trigger the liability decision support system to deploy a detailed mechanism of injury investigative tools.

Medical History and Treatment Information

Injury causation and the qualification of treatment are key elements of liability claim handling and a liability decision support system / platform. Correlation of injuries, diagnosis, and the treatment (ICD9/10 and CPT codes and their correlation to the physical injury mechanisms) are important elements of the medical handling process. Additionally, these elements establish a baseline for the analytical processes that are the basis for establishing injury causation and financial predictors.

Other areas that have direct adjudication elements such as usual and customary rate analysis for over-billing via geographical area, specialty, etc. can help give a relative measurement for claim representatives. Physician fee schedule (Centers for Medicare – Medicaid Services) analysis, comparison for service charges and other ancillary services for medical cost containment all contribute to the establishment of a baseline for normalized medical units that provide a consistent exposure base. The medical dimension of the exposure model is a key predictor to the overall financial elements of a claim. The liability decision support system / platform must allow claim representatives to not only adjudicate medical, but must also utilize the results in the overall exposure model that drives the settlement process and resource profile for the claim.

Negotiation Factors

Ongoing exposure prediction, as well as prediction of the key negotiation factors allows the claim to be presented to the claim representative in proper context. Additionally, the prediction driven process allows the determination of the resource profile for the claim (Turner and Zizzamia, July 2008). Below are examples of prediction of the key negotiation factors and modifiers of the negotiation platform:

  • Contributory negligence and comparative fault analysis and documentable application to settlement offer ranges.
  • Use of insurers’ historical data and industry standards for advanced profiling and case correlation.
  • Quantification of the effect of attorney representation on probable settlement outcomes.
  • Individual analysis of attorney records and venue specifics.
  • Pre-existing conditions effects on negotiations and settlement outcomes.
  • Strength of case prediction to provide claim representative settlement guidelines.

Exposure Model: Analytical Approach and Tools

Exposure modeling should be seen as a dynamic and continuous process throughout the lifecycle of a claim. At any given time, the exposure model generated by the liability decision support system provides a snapshot of the predicted exposure given all of the available information at that moment. However, truly sophisticated exposure modeling is much more like a movie than a snapshot or series of snapshots. It is both continuous and reactive to changes in predicted exposure as they occur.

Changes in any of the elements of exposure during the claim life-cycle will cause corresponding changes in the exposure prediction model. A sophisticated liability decision support system will react to those changes by automatically providing the analytical tools to the claim representative that are best suited to investigating and resolving the claim given the level of exposure prediction. The tools available to the claim representative will vary on a continuing basis as the predicted exposure level of the claim varies (Ayuso and Santolino, 2008/07).

Tools/Platform Elements

The tools available to the claim representative can be thought of as resource profile / platform elements. The availability of the platform elements varies with the exposure prediction level of the claim. High exposure level claims that require in-depth investigation by the claim representative will see a greater number of platform elements presented to the claim representative than will relatively simple low-exposure claims.

Data and information generated by the claim representative through the use of each platform element is used by the liability decision support system to continuously refine the exposure prediction level of the claim. As exposure prediction levels change, the liability decision support system continuously responds to those changes by providing the claim representative the platform elements best suited to analyzing the changes and minimizing exposure levels.

Platform Elements/Exposure Analysis Tools – examples

Understanding each of these tools and how they incorporate new data into the exposure model is critical for heuristic process exposure evaluation. Each of the products incorporated into an exposure driven platform allows for the utilization of appropriate tools given the overall exposure of the individual claim.

Medical Bill Review

Medical cost contentment is a critical function of a liability platform. The elements of the adjudication process are also a large adjustment expense. A platform that can differentiate exposure can select the elements of adjudication. These elements can be incorporated and triggered by; different medical bill processes (including medical utilization prediction), usual and customary rate data, expert analysis requests, provider sequencing flags etc.

Medical Profile Review

Nurses, specialists, experts etc., understanding the aspects of the medical review that includes medical history and reports specific services can be incorporated into the claim evaluation process given the triggers of these factors within the development of the case.

Expert Witnesses and Reports

Integration into legal services for attorney representation and the evaluation of the strength of case based on the progression of the evaluation process case analysis using quantification of expert reports and other specialists can add additional dimensionality to the exposure model.

Medical Records Review

For a certain case the specific medical record subject to review can provide date of service sequencing that can be added into the exposure model and change the exposure base for the predicted engines for general damages.

Police report retrieval and review

Services such as police report retrieval and review can also be incorporated based on factual information in the development of the case. In many organizations such services are used as a matter of fact. When straight through processing based of key predictive nodes each service has a defined role in the claim process.

Accident Reconstruction

An investigation may also include sophisticated techniques such as accident reconstruction. These types of techniques can be warranted given questionable factors surrounding the accident and the injuries that are being claimed. Most importantly if the exposure prediction mechanisms are accurate these techniques can be used effectively establish injury causation.

Causation Analysis

There are a number of techniques that can establish mechanisms of injury. These techniques can be incorporated to show causation within the process of evaluating the injuries and the circumstances surrounding the individual case.

Negotiation training/coaching

The ability for a liability support platform to communicate factual and predicted aspects of a claim to the representative so that the full context of the case is apparent during the negotiation phase of a claim is critical. Unobvious concepts related to strength of case and fraud indicators can be extremely important. Additionally, given the circumstances of the case support modules that discuss the injuries that are being claims and the causation factors can help the claim representative.

Tools – Note

Each of the exposure factors and tools can be taken in any specific order; however, the order and number can be designed by the organization to address key strategic goals and individually incorporated into the exposure platform. The point about tools is that they should be incorporated based on exposure of the claim and that all claims should not be forced through tools – tools are based on exposure there by utilizing services, maximizing efficiency and minimizing loss adjustment expense.

Conclusion

There are three major drivers to the evaluation of a liability decision support system / platform, (1) assisting the claim representative to understand the key elements of the claim information as it develops, (2) providing predictive elements of key financial nodes within the liability handling process and (3) the utilization of claim organizations tools / resources that will aid in providing the best outcomes of the claim process, thereby, minimizing the overall loss cost expense for the organization.

In this segment we continued to provide food for thought and encourage the thought process that can inspire the reader to examine their existing claim processes with a renewed perspective.

Bibliography

Ayuso, Mercedes and Santolino, Miguel (Working Papers 2008/07): p1-24: Forecasting the maximum compensation offer in the automobile BI claims negotiation process. Research Institute of Applied Economics 2008

Turner, Kevin A and Zizzamia Frank (July 2008): Predicting Better Claims Management. Risk and Insurance Management Society. Retrieved 9/1/2012 from: http://www.rmmagazine.com/MGTemplate.cfm?Section=MagArchive&NavMenuID=304&template=/Magazine/DisplayMagazines.cfm&Archive=1&IssueID=324&AID=3706&Volume=55&ShowArticle=1

(CC) September 2012 Vatti-Manhattan Group
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An Exposure Driven Approach Part 2 – Workload Quantification

On September 14, 2011, In Claim Liability Operations, By VMG

The Claim’s Organizational Structure

In Part 1 of our series, “An Exposure Driven Approach,” we examined the key role that the liability claim exposure model plays in the management of a claim throughout its lifecycle. In this article we will look at: how the liability claim exposure model complements the workload quantification model; how it can be used by the organization to quantify and distribute individual workloads in order to maximize adjuster efficiency through effective triage; and finally, how it can also be used to develop the most effective staffing profile for the organization as a whole.

Utilizing the liability claim predictive exposure model in workload quantification requires an organization to have a thorough understanding of its claim servicing model, and how that model drives the allocation of available resources. For the purposes of this series of articles, the term “claim servicing model” can be thought of as the management defined prioritization of resource allocation based upon how the organization has defined its liability claims organizational structure. We will see that the claim servicing model chosen by the organization will significantly define the organization’s focus, structure, workflow, and staffing model.

Claim Servicing Model

Claim liability can be characterized in part by the structure of the claim servicing model around which the organization has been designed. For example, a liability organization can be designed around a geographic based claim servicing model. In such a model, the organizational thought is that the workforce of liability adjusters who are highly specialized in the local laws, customs and norms within given geographical areas can accurately assess exposure potential and guide claims through the most advantageous settlement process, given the idiosyncrasies of the jurisdiction governing the claim. (Consider for instance jury damage awards likely to be decided by a jury in the Bronx, New York, versus a jury in rural Texas.)

A liability organization structured around a geographic claim servicing model will require a workflow model that triages claims to adjusters based upon the adjuster’s familiarity with the locale of the claim. If claims are assigned to adjusters outside of their geographic area of expertise, the efficiency of both the individual adjuster and of the claims handling process as a whole would be expected to have less positive financial outcomes for these assignments; hence triage would first focus on geographic area.

Geographic based claim servicing models represent just one of the possible structures of the claim liability organization, and is used in this article to emphasize the point that whatever foundational structure is implemented (from specific geographic offices to one of centralized service centers), that structure will act as the organizational base of the liability group. An exposure driven claim servicing model is a complementary framework around which the organization triage can be enhanced.

Exposure Driven Claim Servicing Model

In an exposure driven claim servicing model the adjuster workforce is designed based upon exposure potential of the types of claims handled by the organization. For example, if an organizational analysis of claim patterns reveals that the greatest claim frequency potential lies in soft tissue injuries, the organization would structure its workforce so that its liability claim adjusters have an exposure delineation with soft-tissue injury expertise predominant within the claim process, complemented with adjusters with expertise within other injury types. Likewise, it would structure its workflow so that the exposure delineation of soft tissue injuries would be directed to those adjusters with the most experience, or those adjusters with expertise in the particular type of injury reflected in the claim.

Claim servicing models based on exposure can take other base or complementary forms. For example, the litigation/attorney representative driven model can function in a complementary role to the exposure driven model. In this model the organization structures its workforce with adjusters skilled in the negotiation techniques and strategies that might be required during any portion of the lifecycle of the claim. For example, an adjuster will use different negotiation styles depending upon whether the adjuster is negotiating directly with a claimant or with a claimant’s attorney. Claims workflow in this model is characterized by triaging of claims to the adjuster best suited to the particular type and style of negotiations most likely to result in a satisfactory resolution of the claim.

The claim servicing models mentioned above are general examples that highlight functional structures within a liability organization. The model adopted by any organization will be dependent upon the requirements of the specific organization, and will be determined by senior  management of the organization. Notwithstanding, exposure and more importantly predicting exposure and triaging, are the key elements within an organization’s functional structure.

Organizational Skills

The ability of any organization to develop and maintain a workforce with skill levels sufficient to meet the demands of the workflow handled by the organization is paramount to its success. Matching workforce skill levels with work requirements is particularly important within a claims organization. It is especially significant within the liability function because of the range of skills required to handle claims of varying complexity and because of the difficulty in both recruiting new adjusters and retaining experienced adjusters.

For these reasons, it is important that management has the ability to both quantify the skill levels of their adjuster workforce, and to track those skill levels on an ongoing basis. This ensures the availability of an adequate pool of adjusters in the workforce, with skills matched to both current and predicted claim inventories.

A recent article in Best’s Review highlights the current adjuster shortage in the industry, and the need for maximizing the productivity of experienced adjusters:

Experienced claims people are an increasingly scarce resource. In fact, in early 2006 Deloitte Consulting predicted a shortage of 84,000 adjusters by 2014.
Prior to embarking upon huge hiring efforts, carriers should first ensure that they are maximizing the value of the claims adjusting talent they have by evaluating where, when and how they use their current claims resources.

Highly experienced resources must be reserved not only for the claims (or pieces of the claim, such as individual coverages) that truly require their expertise, but also for the knowledge transfer they can pass along to less-experienced claims professionals. (May 2011, p33)

Claims Inventory and the Staffing Model

In addition to understanding the dynamics of the claim servicing model under which the liability group functions as a whole, the organization must also analyze its claims inventory flow and assess its workforce needs under all possible variables within that flow. Is the claims inventory of the organization stable across time, is there seasonality?  Other factors that can influence the claim service model such as mix changes, given business model/strategy changes, or organizational acquisitions must also be assessed for their effects on the model.

The organization must have a clear understanding of the baseline norm of its claims inventory, and when there is likely to be a deviation from that norm (either high or low) as well as the probable degree of that deviation. With this understanding the organization can structure its most effective workforce size to deal with its average claim flow yet retain the flexibility to deal with anticipated peaks in claims flow.

To achieve maximum efficiency, the staffing model of the organization must be a reflection of both the claim servicing model developed by the organization, and the inventory flow of the claims serviced by that organization. To put it another way, the skills possessed by the adjuster staff must match as accurately as possible the demands made of that staff for the type and number of claims being handled by the organization. Furthermore, claims should be assigned to adjusters based upon all factors, not just one – the adjuster’s skills, inventory, and the claim servicing model of the organization. The claim servicing model should be the guide in determining staffing levels, including both the number of adjusters and their skill levels.

In a January / February 2009 article, the journal Risk Management noted that a staffing model which brought the right adjuster to the right claim at the right time would result in lower operating costs for the organization:

Risk managers should implement a new approach to claims management that drives down open claim inventory levels while driving up speed and efficiency. They should go back to the drawing board and implement a claims staffing model that will allow them to maintain this lower cost operating model. If the right expert is brought to the table, the risk manager will most likely find a lower cost claims administration program with far greater efficiencies than they had before. (p56)

Claim Workload Quantification

Workload Elements

All claims are not created equal. Regardless of their severity or complexity, they require that adjusters perform certain key operations. These operations will vary in the amount of time and effort required for their completion, depending upon the specific factors involved in each individual claim. The operations that are common to all claims can be thought of as basic claim workload elements. The specific factors that affect the time spent on completing the basic claim workload elements can be thought of as workload multipliers.

Basic workload elements common to all claims include such items as:

  1. Contact with both claimant and insured throughout the claim lifecycle.
  2. Data input on the specifics and details of the claim.
  3. Investigation of the specific element of the claim.
  4. Analysis of the claim and settlement offer or proposal.
  5. Negotiation of final settlement of the claim.

Each of these basic claim workload elements (and any others which might be specific to the business process for any given organization) can be quantified by the time required to complete them. That quantification can be defined by the term work units. Obviously claims that are more complex or that have greater exposure potential will require that an adjuster devote more time to completing any or all of the basic workload elements required to handle the claim. As the complexity or exposure potential increases, the work units required to complete the basic workload elements for the claim increases as well.

Workload Multipliers

Workload multipliers are any elements of the claim that increase the work units required to complete the handling of the claim. These can be present at the beginning of a claim or they can occur at any point during the lifecycle of the claim. Following are examples of various categories of workload multipliers.

  1. Claim age. Most routine claims require the most effort by adjusters (work units) during the 30 day period after initial filing. In effect, work effort is front loaded into the claim cycle. During that time adjusters conduct initial interviews, gather routine information, enter that information into claim management systems, make assessments, recommendations, etc. As the claim progresses through its lifecycle, it generally requires less effort by the adjuster.
  2. Reported date lag on claims. This can play a significant factor as workload multipliers. Often a lag in claim unit reporting will require substantial extra effort by the adjuster to complete the routine tasks associated in handling the claim. For example, it may be harder to locate involved parties; interviews may require more time and effort because memories have faded, etc.
  3. Exposure class changes. If the exposure potential of a claim increases significantly during its lifecycle, greater resources will need to be devoted to handling that claim. An increase in a claim’s exposure potential from its expected or predicted exposure level will act as a workload multiplier, increasing the work units needed to close that claim.
  4. Attorney representation and/or litigation. If, during the lifecycle of a claim, a claimant should move from direct interaction or negotiation with the adjuster, to attorney represented negotiation, that change will act as a workload multiplier for that claim. Such a change will require that the adjuster devote more time to extra contact with the attorney, increase clerical requirements, and maximize negotiation efforts. Should the claim proceed to litigation, the workload multiplier effect will increase even further.
  5. Indemnity payment effects. Claims that can be closed without indemnity payments to the claimant will obviously require fewer work units and the inventory effect of these claims in the overall mix is a needed factor to take into consideration.

Quantifying Workload

Once the claims organization is able to define both the basic and multiplier elements that comprise the workload of its core claim handling functions, it will be able to quantify those elements and assign work unit values for each of them. In addition, management will possess a tool that will give it the ability to classify claims by both estimated time and work unit requirements.

  1. Timeframe. As noted above, most routine claims will fall into a frontloaded work unit structure. Assuming the claim is filed in a timely manner and that there are no substantial workload multiplier elements, the average routine claim will exhibit an initial surge in required work units (as the claim enters the processing system). As the claim progresses through its lifecycle the amount of work units devoted to it will steadily decrease, except for a brief spike as the claim reaches final settlement and closure.
  2. Work unit quantification. The timeline required to settle a routine claim can serve as a useful benchmark for the organization. The time it takes for each basic workload element to be completed can be quantified and averaged across the range of skill levels of the organization’s adjuster workforce. Once this is done, the organization will have a metric that can be used in conjunction with the liability claim exposure model to give a numeric indication of the work units required (as defined by the organization) for the completion of each basic workload element. From that baseline measurement, the same process can be applied for each potential workload multiplier and its effect on the work units required across the varying skill levels of the adjuster pool.

By objectively quantifying the workload elements involved in claim handling, the organization will be able to triage their claims inventory by workload type and assign adjusters based on ability and inventory. Using the exposure model to triage claims into work unit categories at the beginning of the claim lifecycle will provide the organization the flexibility to triage claims in the most efficient manner, matching adjuster skill levels with claim requirements. In addition, effective claim triage will permit management to balance employee workloads during both routine operations and during periods of increased or decreased claim flow.

Monitoring

Effective management of any liability group requires the ability to efficiently and accurately model all of the elements involved in the claims handling process. In order to maximize adjuster productivity, measure strategy and effectiveness, and better understand trends as they evolve, management must monitor and adjust both the workload and workflow within the organization. Workload analysis using a liability claim exposure model can provide the organization the ability to analyze adjuster performance across the entire range of claims operations.

By applying a work unit metric to individual claims handling elements, management will be able to measure adjuster performance in handling not only individual claim functions, but also across claims of varying types and ages. This will in turn, provide management both greater flexibility and greater precision in claims assignment, and will result in the most efficient utilization of the adjuster workforce.

While the liability claim exposure model can play a key role in helping assess individual and organizational performance as well as determining optimal workload and workflow, it is not limited to these functions alone. By applying the data derived from workload quantification against normal claim flow fluctuation, management can develop a staffing model template that is both efficient and responsive to workflow changes.

Closing Thoughts

In the first installment in this series, we illustrated how the liability claim exposure model can provide a foundation that an organization can use for both claim management and workflow/workload distribution. In this article, we went on to describe how the liability claim exposure model can also be the basis for quantifying both organizational and individual workloads, and how that quantification can be used to triage the claims inventory and produce a staffing model designed to service that inventory.

In part 3 of our series, we will look at the dynamic interaction between the liability claim exposure model and the liability decision support system.  We will examine the concept of the liability decision support system as platform rather than product, and how that concept can ensure that adjusters are provided the right tools at the right time for optimal claim resolution.

Bishop, Mike, and Mahoney, Mike. “Filling a void: property/casualty insurers need to hire and train the next generation of adjusters.”  Best’s Review. Retrieved 9/1/2011 from Gale Power Search (Infotrac): Subscription or Library membership required.

Pelto, Corby. “Three ways to cut claim costs now.” Risk Management. Retrieved 9/4/2011 from: http://www.rmmag.com/Magazine/PrintTemplate.cfm?AID=3841

(CC) September 2011 Vatti-Manhattan Group
This article may be copied and distributed freely provided that you keep this copyright notice intact and is provided for free and without charge.  We have to the best of our knowledge abided by all copyrights, trademarks and quoted material.  Any comments, omissions, misuse concerns etc. regarding the use of trademarks and copyrights should be directed to info@vatti-manhattangroup.com.

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An Exposure Driven Approach

On June 15, 2011, In Claim Liability Operations, By VMG

For the liability claims organization everything revolves around the exposure model. Accurate exposure prediction is the key to effective claim handling on the individual claim level, and is vital to the efficiency and consistency of the organization as a whole.  At the individual claim level, an exposure driven approach results in effective claim triage that assigns services based upon predicted exposure. At the organizational level the exposure driven approach allows the organization to develop the most efficient staffing models for the types and quality of claims being handled by the organization.

In this series of articles we will examine how a liability decision support system that is structured around an exposure driven approach philosophy can result in more effective claim handling and increase the efficiency and effectiveness of the organization as a whole. The series consists of four articles, each of which will cover in depth one element of the claims management process and how that element can be enhanced through the application of an exposure driven approach philosophy.

The first article in the series will cover what we refer to as Triage and Investigation, and how the exposure model for a claim should be the driving factor in the management of that claim throughout its lifecycle. We will also examine how an exposure driven approach can affect organizational dynamics and staffing models.

The second article in the series will focus on Workload Quantification and how an understanding of the exposure model allows for the most efficient assignment of claims, (i.e., the right adjuster for the right claim), and how that exposure model also determines the amount of work required to resolve the claim.

The third article will look at the liability decision support system and how it needs to be Adaptive to the exposure prediction model on a continuing basis throughout the claim lifecycle. We will examine the concept of the liability decision support system being a platform rather than a product, and how, depending upon the exposure model, it can bring to bear the proper tools at the proper time in the claim cycle so that the claim can be resolved in the most optimal manner possible.

Finally we will look at Measurement and Peer Comparisons through the prism of the exposure driven approach. We’ll examine the need for user “tunabilty” of both exposure thresholds and the toolsets available to the liability decision support system. And we will close the series with a recap and overview of how a liability decision support system with advanced exposure modeling capabilities will benefit the claim organization at both the adjuster and organizational level.

Triage and Investigation – Day One Prediction, Claim Assignment, Claim Management, Organizational Dynamics, and Staffing Models

An accurate exposure prediction for each and every claim, throughout the lifecycle of that claim, (from first notice of loss through final settlement), is the cornerstone of any successful claims organization. Having a reliable exposure model allows the claims organization to triage claims and assign adjusters and resources to maximize productivity and efficiency, and minimize the cost of the claim handling process.

In medicine triage is the process of determining the priority of treatment by sorting casualties based upon the severity of their injuries. In claims the concept of triage can be thought of as assigning adjusters and resources to manage a claim based upon the exposure prediction for that claim. Obviously the sooner that a claims organization can make an accurate exposure prediction for a claim, the more efficiently and cost-effectively that claim can be resolved. A liability decision support system that has both an effective exposure prediction model and the ability to allocate tools that are appropriate for the types and exposure levels of the claims assigned to the adjuster is an invaluable asset for any claims organization.

Exposure Driven Claim Assignment

One of the key elements in developing the most effective and efficient claims organization is assigning the right person, with the right skill set, to the appropriate level claim. The importance of initial claim assignment based upon potential exposure was noted in an article in Claims Magazine by Rebecca C. Amoroso:

A claims talent crisis is looming with a projected shortage of more than 85,000 adjusters by 2012. With the number of expert adjusters dwindling, initial assignment of claims to the right resource is more important than ever. By better understanding a claim’s true exposure, explosive cases are quickly directed to the most qualified adjusters while low-exposure claims are channeled to less experienced resources or auto-adjudication. (August 2008, p1)

While the need for proper initial claim assignment may seem obvious, the complexity of accomplishing that seemingly simple task becomes readily apparent when you consider an organization with hundreds, or even thousands of adjusters, each at a different competency level, handling hundreds or thousands of new claims daily.

By utilizing the exposure prediction model of a trusted liability decision support system as the basis for assigning claims to adjusters, the claims organization has a built in mechanism for enforcing consistency of assignment that most efficiently utilizes the talents and skills of its adjusters, no matter what their level of expertise.

By having the ability to assign the right adjuster as early as possible in the claim handling process, the claims organization can also minimize adjuster reassignments during the life of the claim. Reassignments are costly to insurers on multiple levels – they increase the time period needed to settle a claim (making it more likely a claim will enter litigation), they involve duplication of effort (increasing labor costs), and they generally are a major source of consumer complaints involving insurer claim practices. Author Rod Travis, an executive vice president for a management consulting firm specializing in the insurance industry, noted in the Consultants Corner blog of Insurance Networking News, the role that information technology (of which the liability decision support system is a key element) can play in assigning adjusters:

IT can improve financial results by partnering with claims departments to deliver stronger claims automation and better analytics from claims data. This can help identify cases with potentially higher losses, enabling early and appropriate intervention. One simple example is flagging low-severity soft tissue injuries. Such claims warrant a more senior adjuster be assigned. (April 12, 2011, p1)

Exposure Driven Claim Management

Claims are dynamic, with their classification and complexity frequently changing during the life of the claim. These changes must be continuously monitored by a liability decision support system that dynamically reacts to each change with an updated and current exposure prediction model. That model in turn should be the basis for assigning adjusters to a claim based upon their strengths and skills as well as providing a framework and tool set that will best allow the assigned adjuster to most efficiently handle the claim.

Changing elements within a claim represent a dynamic environment in which a liability decision support system can play two important roles. First, the system should be able to assess the effects of any changes on the exposure prediction value for the claim. A 2005 Business Insurance article in which author Rupal Parekh interviewed claims technology expert Donald Light of Celent Communications, touched upon the importance of this liability decision support system function:

To help determine what is fair and accurate for both claimants and the insurance company, some online systems now provide suggested settlement amounts, using a rules engine, Mr. Light noted. For example, in the case of a bodily injury such as a broken leg, systems are available that can provide the adjuster with the average settlement amounts based upon geographic-specific medical costs. (May 1, 2005, p12)

Parekh quoted Mr. Light as saying of these systems, “For newer adjusters, especially, that takes away the likelihood of making a human error.” (May 1, 2005, p12)

The other important role of the liability decision support system is to assist the adjuster in the investigation of the claim by suggesting and making available investigative tools and resources that are tied to the initial or changing circumstances of the claim. The tools best suited for the investigation of a claim are almost wholly dependent on the exposure potential of the claim. If exposure potentials are initially high, or if they should change significantly during the life of the claim, a sophisticated liability decision support system should be able to suggest to the adjuster the most appropriate investigative resource.

For example a sudden and significant change in medical specials midway through the investigation of a claim, could trigger the liability decision support system to suggest to the adjuster that a specialized impact analysis be performed. Tools that predict the probability and severity of injuries based upon an impact study of the underlying accident, could be helpful in determining if the change in medical specials is warranted.

Staffing Models and Organizational Dynamics

A liability decision support system that is focused on exposure can also be the lead element in determining the most efficient staffing model for the claims organization. The data that the liability decision support system uses in creating exposure prediction models for individual claims can also be used on a macro level across the claims organization as a whole, to create an optimal staffing model by providing a basis for the quantification of different exposure events.

Developing a staffing model that matches adjuster skill sets and event quantification and that also provides a means of modeling actual claim workloads (and the exposure level across those workloads), is a formidable but absolutely essential task. On his insurance-related blog, The Claims SPOT, Marc Lanzkowsky addresses the issue of developing a staffing model. “Having a staffing model will allow you to objectively look at your operation and help determine if it’s a good time to hire more staff” (May 3, 2010, p1).  He lists 3 suggestions for creating a staffing model. First says Lanzkowsky, determine:

  • What kind of organization are you?….Understanding the strategic position of your claims organization is critical to understanding what kind of staffing model is relevant.
  • Decide on a metric to develop your model: The metric you choose will help to determine the model, but will be wholly based upon the types of claims organization you are….Maybe your claims settle quickly, as in some property matters, so the number of new claims a handler receives in a month is a more critical metric…
  • You now have the metric – test the staff and come up with the model: Once you settle on a metric, check your top performers against the new metric you have selected. How many files are they handling and still managing files within best practices? At what point does their ability to manage those files well breakdown? Take an average of the top performer’s metrics and you will have a staffing model to give you a benchmark.  (May 3, 2010, p1)

Using exposure models as the metric which Mr. Lanzkowsky refers to in his second point in the above quote can allow the claims organization to match the skill sets of its staff to the actual types and exposure levels of its claims inventory. Matching adjuster staff skill levels against the claims inventory exposure levels is an effective method of developing a staffing model that is made possible through the exposure driven approach philosophy.

The above methodology also gives the claims organization the operational flexibility to monitor changes in claim types, volumes, and exposure levels and adjust its staffing requirements in a timely manner to reflect those changes.

Conclusion

A liability decision support system that provides advanced exposure modeling capabilities will benefit the claims organization on multiple levels. At the adjuster level it will increase the efficiency and consistency of the claims handling process. At the organizational level it will assist in developing staffing models that accurately reflect the true operational needs of the organization.

Amoroso, Rebecca C. (August, 2008). Science Project – Tech Decisions. Claims Magazine Retrieved 6/2/2011 from: http://www.propertycasualty360.com/2008/08/01/science-project

Lanzkowsky, Marc. (May 3, 2010) “Does Hiring More Staff Improve Claims? How To Know When The Time Is Right.” The Claims SPOT – SPOT on Ops Retreived 6/2/2011 from: http://theclaimsspot.com/2010/05/03/does-hiring-more-staff-improve-claims-how-to-know-when-the-time-is-right/

Parekh, Rupal. (May 5, 2005, p12) “All Systems Go; Automating claims processing systems can speed up processing and boost the bottom line.” (Cover Focus: Information Technology). Business Insurance. Retrieved 6/1/2011 from: Expanded Academic ASAP (Infotrac): Subscription or Library membership required.

Travers, Rod. (April 12, 2011) “5 Steps for Insurers to Maximize Profitability. Insurance Networking News Claims Blog. Retrieved 6/6/2011 from: http://www.insurancenetworking.com/blogs/insurance_technology_IT_projects_profitability_growth-27652-1.html

(CC) June 2011 Vatti-Manhattan Group
This article may be copied and distributed freely provided that you keep this copyright notice intact and is provided for free and without charge.  We have to the best of our knowledge abided by all copyrights, trademarks and quoted material.  Any comments, omissions, misuse concerns etc. regarding the use of trademarks and copyrights should be directed to info@vatti-manhattangroup.com.

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Comparative Negligence – A Multidimensional Approach to Claim Investigation

On March 9, 2011, In Claim Liability Operations, Litigation, By VMG

The ability to accurately evaluate comparative negligence in automobile accidents is a vital skill for any claim representative. The liability decision support system used by the claim representative must serve to augment and bring consistency rather than restrict that skill. Unfortunately many of the liability decision support systems used by insurers today are designed to second guess the skilled thought processes of the claim representative and channel them into a pre-determined, one-size-fits-all decision tree.  Although, many would tell a tale of the salvation of their computer programs – we are not of that mind set.

In this article we will show how an advanced liability decision support system can augment the inherent skills of the claim representative and allow that representative to make comparative negligence evaluations that are multidimensional, viewing the claim as a whole rather than as isolated elements. This multidimensional approach allows the claim representative to structure their evaluations of the key elements of the investigation to make comparative negligence assessments. In addition, these assessments reflect both the factual elements of the claim as well as the more intangible elements such as credibility, quality, and reliability of information sources, elements which can have major impacts on the outcome of negotiations or litigation.

Brief History of the Development of Comparative Negligence vs. Contributory Negligence

Over the past half century the doctrine of comparative negligence has gradually replaced that of contributory negligence in American tort law and has now become the standard in state automobile insurance regulations across the country. In a 2001 Harvard Law School – John M. Olin Center discussion paper, author Oren Bar-Gill noted:

The comparative negligence rule, and more generally the principle of comparative fault, is sweeping through the law of torts, and beyond. Through statutory intervention or judicial innovation, the traditional common law doctrine of contributory negligence has been gradually pushed aside. And the march of comparative fault continues. (Paper 346, 12/2001, p4)

The contributory negligence doctrine had been the governing standard for automobile insurance law for the first half of the twentieth century throughout most of the United States (it remains so in four states and the District of Columbia – see Appendix A). Under the contributory negligence system, third party lawsuits for injuries sustained in automobile accidents were not permitted if the plaintiff in that lawsuit was judged to be even partially at fault in the accident. It did not matter how minor the fault, if it existed at all, recovery of damages was prohibited.

Acceptance of the contributory negligence standard slowly began to decline as dissatisfaction with its relatively harsh results grew among the general public. Pressure from the motoring public and lobbying from trial attorneys resulted in a shift away from the contributory negligence standard. State legislatures across the country began to substitute the new standard of comparative negligence into their automobile insurance regulations. Comparative negligence in its simplest form is a legal doctrine that enables claimants to recover a portion of their damages even when they are judged to be partially at fault for an accident. Each driver’s degree of negligence is compared to that of the others and a claimant’s recovery is reduced by the percentage of his or her negligence.

Depending upon state statutes, comparative negligence takes one of three forms: pure comparative negligence, modified comparative negligence – 50% rule, or modified comparative negligence – 51% rule.

  • Pure comparative negligence – Thirteen states use the pure comparative negligence rule which allows any person suffering damages to recover even if that person was 99% at fault. Any damages awarded however, are reduced, by the damaged party’s degree of fault. In a noted 1975 decision (Li v. Yellow Cab Company), the California Supreme Court, moved the state of California from a contributory negligence system to one of pure comparative negligence. In its decision the court mandated that:

Therefore, in all actions for negligence resulting in injury to person or property, the contributory negligence of the person injured in person or property shall not bar recovery, but the damages awarded shall be diminished in proportion to the amount of negligence attributable to the person recovering. (1975, p10)

  • Modified comparative negligence – 50% rule. In the twelve states utilizing this variation of modified comparative negligence an injured third party can only recover damages if his or her fault does not reach 50%. If a driver is judged to be 50% or more responsible for an accident that driver is prohibited from recovering damages. As with pure comparative negligence, damage awards are apportioned according to the degree of responsibility.
  • Modified comparative negligence – 51% rule. Twenty one states use the 51% rule. Under this version of modified comparative negligence an injured third party may recover damages if his or her responsibility is 50% or less. In other words damages can be awarded to a driver who was 50% responsible for the accident, but not if he or she was 51% or more responsible. As with pure comparative negligence, damage awards are apportioned according to the degree of responsibility.

Note – for a listing of the damage award system in use by each state, see appendix A at the end of this article.

A Structured Approach to Evaluating the Components of a Claim Investigation

All claim investigations are built around three key foundational pillars: investigative reports, physical evidence, and statements. Investigative reports can take the form of police reports, accident scene photos, skid mark analysis etc. Physical evidence is the evidence resulting from an accident – damage to vehicles and injuries to those involved. Statements include statements by the involved parties or witnesses, made to the police at the scene or to the adjuster during his or her investigation, as well as statements provided by expert witnesses brought in to analyze specific elements of the claim.

During the initial portion of a claim investigation the goal of the adjuster is to ascertain the facts of the accident and to determine the liability of each of the involved parties – the claimant (or claimants) and the insured. A key element in determining liability is assessing the comparative negligence for each party involved in the accident.

In assessing comparative negligence, the adjuster uses the investigative reports, physical evidence, and statements to evaluate their content as well as their reliability, quality, and credibility. This evaluation in essence determines if there was a breach of duty by any of the involved parties and if so, what part those breaches of duty played in the accident. This linkage is important given the fact that the concepts of duty owed and duty breached are tort concepts that would be used in a judicial context. Below is a summary of the main elements inherent in the concept of  negligence and breach of duty as outlined by author David J. Shestokas in his article, “The Law of  Negligence”:

Doctrine of Breach of Duty in Motor Vehicle Accidents

A claim investigation can establish that an insured either had no duty or did not breach a duty they did have, or it can establish that a claimant contributed to an accident by breaching a duty the claimant had.

In order to recover damages based on negligence a claimant must prove that all of the elements that comprise negligence are present. These elements are:

  • Existence of a duty by the insured
  • Breach of that duty by the insured
  • Actual harm or damages caused to the claimant
  • The breach of duty by the insured was the proximate cause of the actual harm or damages suffered by the claimant. (Mar 25, 2009, p1)

The operation of a motor vehicle on a public roadway imposes duties upon the operator. There are duties that are common among all states and jurisdictions and there are other duties that are state specific. Common duties include:

  • Duty to look out – you must pay attention and be aware while driving.
  • Duty to operate safely
  • Duty to Avoid – you must do all that is reasonable to avoid a collision or contact with another vehicle or pedestrian.
  • Duty to obey traffic laws
  • Duties created under the “reasonable man” theory. – You must operate your vehicle as would a “reasonable man” in similar circumstances.

The breach of duty concept is fundamental in assessing degrees of comparative negligence for both claimants and insureds. Anyone who is determined to have a breach of duty in an accident is negligent. In any accident, one or both parties can be found to have committed a breach of duty resulting in negligence which contributed to the accident. A sophisticated liability decision support system can assist the adjuster in determining comparative negligence by allowing the adjuster to rate the reliability, quality, and credibility of each the three investigative pillars: the investigative reports, physical evidence, and statements. These ratings, based on the expertise and experience of the adjuster, are used by the liability decision support system in determining the probable shared responsibility of the claimant for the accident.

Given the fact that this assessment of duty owed duty breached is critical to a comparative negligence determination, a system that provides investigation survey templates that are populated with the factors that are relevant in determining the comparative negligence of both the claimant and the insured is paramount. The factors within the templates will assist in determining which driver breached which duty, and the degree those breaches played in the comparative negligence of the claimant and the insured. Because those factors vary greatly with the specific type of accident, the liability decision support system must be adaptive and flexible enough to provide the adjuster with only those query sets that are relevant to the specifics of the particular accident. In addition, a truly advanced liability decision support system will allow an adjuster to use their experience in rating the reliability, quality, and credibility of the reports, physical evidence, and statements themselves. These ratings will be used in generating both comparative negligence assessments and in more advanced systems, an overall strength of case evaluation which can assist the adjuster in deciding the best strategy to adopt in settling the claim. This will insure consistency across claims and within the organization, and provide defensibility should the analytical process itself be challenged.

The results of the analysis provided by the liability decision support system should produce a liability and comparative negligence assessment that provides a useful guideline that the adjuster can use for negotiations and settlement of the claim. We have found that providing the adjuster a visual scaled representation of the probability of the claimant’s shared responsibility for the accident, is an effective method of alerting the adjuster that there is a comparative negligence element that should be pursued.

Summary

When considering the processes involved in the investigation and evaluation of claims some of the fundamentals that an organization should keep in mind include:

  • The liability decision support system should allow the adjuster to focus on the key elements of the claim, and produce a liability and comparative negligence assessment that provides a guideline for negotiations and settlement of the claim.
  • The adjuster must have the flexibility in their investigation to pursue whatever avenues of information are relevant to the claim. The liability decision support system must not become an impediment to that flexibility by forcing the adjuster to adhere to a pre-determined, one-size-fits-all investigative template.
  • The liability decision support system must provide a support structure that allows the adjuster to apply their investigative skills in the most productive and efficient manner.
  • In assessing liability and comparative negligence the adjuster must be able to document objective and consistent standards that are applied across all claims. The liability decision support system should provide a mechanism that is defensible and demonstrably unbiased.
  • Ideally, the liability decision support system will also provide an objective assessment of the strength of case in the event the claim was to proceed to litigation.
  • The liability decision support system should provide a mechanism that allows the adjuster to enter both the factual and subjective elements of the claim for evaluation. The evaluation returned should provide both a strength of case rating, and negotiation points that can be used by the adjuster in determining whether a case should be defended or settled.

The liability decision support system should augment and support the adjuster’s investigation and evaluation of the claim. It should not be thought of as a sort of “electronic adjuster” that is able to replace the judgment, skill, and analytical expertise of the adjuster. Rather, it should serve to aid the adjuster’s evaluation of the claim by structuring the process of the evaluation itself. Providing a structural framework upon which the adjuster can build an evaluation gives consistency to the evaluation process across claims and throughout the organization.

Bar-Gill, Oren. (12/2001, p4). “Does Uncertainty Call for Comparative Negligence?” (Paper 346). Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series. Retrieved 2/10/2011 from: http://lsr.nellco.org/cgi/viewcontent.cgi?article=1134&context=harvard_olin

Case Reference:

Li v. Yellow Cab Co. (1975 p10) 13 C3d 804 [L.A. 30277 Cal Sup Ct Mar., 31, 1975] Opinion – Sullivan, J. – III [6]. Retrieved 3/11/2011 from: http://online.ceb.com/calcases/C3/13C3d804.htm

Shestokas, David J. (Mar 25, 2009, p1). The Law of Negligence: Duty, Breach of Duty, Injury and Causation. Suite 101.com. Retrieved 3/8/10 from: http://www.suite101.com/content/the-law-of-negligence-a105023

Appendix A – Damage Award Systems Used by the Various States

Contributory Negligence States: Alabama, Maryland, North Carolina, Virginia, (Washington D.C.)

Pure Comparative Negligence States: Alaska, Arizona, California, Florida, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, New York, Rhode Island, South Dakota, Washington

Modified Comparative Negligence States – 50% Rule: Arkansas, Colorado, Georgia, Idaho, Kansas, Maine, Nebraska, North Dakota, Oklahoma, Tennessee, Utah, West Virginia

Modified Comparative Negligence States – 51% Rule: Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, Ohio, Oregon, Pennsylvania, South Carolina, Texas, Vermont, Wisconsin, Wyoming

(CC) March 2011 Vatti-Manhattan Group
This article may be copied and distributed freely provided that you keep this copyright notice intact and is provided for free and without charge.  We have to the best of our knowledge abided by all copyrights, trademarks and quoted material.  Any comments, omissions, misuse concerns etc. regarding the use of trademarks and copyrights should be directed to info@vatti-manhattangroup.com.

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Information is Key to Successful Negotiations

On October 12, 2010, In Claim Liability Operations, Litigation, By VMG

Negotiating a claim settlement requires a wide range of skills. The claim adjuster must be completely familiar with all aspects of the claim and must be able to negotiate with a claimant (or a claimant’s representative), from a position of confidence that his or her settlement offer is based on a fair and reasonable assessment of the facts of the claim. The key to a proper negotiation is to have the right information in the right form in front of you during the negotiation process.

Information technology supports the key psychological aspects of negotiation. In this article we will explore the key elements of the negotiation process and how they directly correlate to information technology and more importantly the key elements of data to make the negotiation process consistent within an organization.

Psychology of Negotiations

In negotiating settlements with claimants or their representatives, claims adjusters must balance a series of competing needs. They need to satisfy the claimant that he or she is receiving fair compensation for the damages or injuries they have suffered while understanding that the claimant’s view of their required compensation may not be in line with reasonable expectations. They also must balance the need to close cases and at the same time prevent as many claimants as possible from becoming plaintiffs. Author Mikel Benton makes note of this in an article in Claims where he quotes attorney Allen Church as saying:

Adjusters need to say to themselves, “I’m going to do everything I can, professionally, to prevent this claimant – each and every claimant – from acquiring the title of plaintiff, hiring an attorney.” Including good negotiation techniques early…can prevent claims from going to court. (Benton, 1999)

In order to balance these competing needs the claim adjuster must pursue their negotiations from a psychological point of view of achieving a “right end,” or in other words, a settlement that is a fair and reasonable conclusion for all parties involved. A key element in achieving a “right end” negotiating philosophy for a claim adjuster is their confidence in the data they use in constructing their negotiation strategy. That data must be of sufficient detail to provide a true and unambiguous view of the key elements of the claim. It must also be immediately accessible to the claim adjuster so that the adjuster can reference it in real-time ongoing conversations and negotiations. By having access to detailed and trusted data the claim adjuster has the foundation to pursue the negotiation process from a “right end” perspective.

Negotiation Process

For the claim adjuster, whether negotiating directly with a claimant or with a claimant’s attorney the “principled negotiations” strategy is by far the most productive. The principled negotiation theory was pioneered by the Program for Negotiation at the Harvard Law School, and first published in the book “Getting to Yes: Negotiating Agreement Without Giving In” by Roger Fisher and William Ury. (http://www.pon.harvard.edu/tag/principled-negotiation/). Principled negotiation theory is based on four basic criteria – these are defined by USLegal:

Principled negotiation is a negotiation strategy that emphasizes interests, not problems. The four fundamental principles of principled negotiation include: 1) separate the people from the problem; 2) focus on interests, not positions; 3) invent options for mutual gain; and 4) insist on objective criteria.

The principled negotiation concept is ideally suited to situations where information technology is a key element of the negotiation process. Because accurate data and information are inherently objective they allow claim adjusters (and those they are negotiating with) to approach negotiations with a set of shared expectations based on the true facts of the claim. This allows both parties to the negotiations to enter into those negotiations with realistic expectations as to their outcome.

Most plaintiffs’ attorneys will generally recognize this common sense approach to negotiations. In the Association of Trial Lawyers of America publication Trial, attorney Michael Heatherly notes this common sense approach to negotiations:

Maintain credibility. As in the settlement demand, when negotiating, I try to avoid overstatement, acknowledge true weaknesses of the case, and emphasize my best-documented points. Exaggerating or making claims that can’t be backed up objectively will immediately undermine credibility.

Ask adjusters to prove their claims, too. While I try to put forward the best possible documentation of my claims when I begin negotiation, I expect the other side to do the same. For example, if an adjuster claims that the plaintiff was partly at fault because of speeding, I say, “I’ll take that into consideration if you send me something I can show my client to prove that’s true.” I usually find out immediately whether the adjuster is bluffing or stating a legitimate defense. (Heatherly, 1995)

Enhancing Negotiations with Key Data Elements

In the paragraph above attorney Michael Heatherly noted that he would “Ask adjusters to prove their claims, too” during negotiations. The ability to prove your negotiating points, whether to an attorney or the claimant themselves, is the key factor that will enable a claim adjuster to achieve a successful outcome in the negotiation process. Information technology and the information it provides is the key to that ability.

• The more advanced decision support negotiation / liability systems will give adjusters the ability to drill into medical treatment patterns and determine whether treatments were medically justified for the injury being claimed, were provided in the most cost-effective manner, and whether or not they were effective in treating the condition.

• Medical bill charges. Sophisticated decision support negotiation / liability systems allow adjusters to instantly assess whether treatment charges are reasonable by comparing those charges to a detailed UCR database containing charge information for providers providing similar services within the same geographic locations (Historical / Medicare UCR is a unique methodology created and supported by VMG).

• Settlement range suggestions based on comparisons of like cases against a comprehensive database of extended historical claim and settlement data. Settlement ranges are calculated using formulas that take into account various factors such as injury severity, length and type of treatment received, prior existing injuries, aggravating circumstances, contributory negligence and the geographic area.

• Real-time access to claims documentation materials including police reports, witness statements, accident scene photos, medical reports, etc. Having instant access to data of this type allows the adjuster to discuss highly specific elements of the claim in detail with the claimant or their representative in real time. The adjuster can look at photos or medical reports directly while negotiating and use the information to counter or refute specific elements of the claim.

• Strength of Case, as described and referenced in this article, references the most advanced decision support negotiation / liability systems that provide the adjuster an indication of the overall strength of the case should the case proceed into litigation. This is a sophisticated data model that looks at the claim in a holistic manner that includes not only claim specific elements (injuries, loss of wages, pain and suffering etc.), but other elements which might be of major influence in a trial environment. Such items are assessed with the understanding that a jury will evaluate the case with respect to all the participants involved, (insured, claimant and attorneys). These are important elements for an adjuster to consider because they are also routinely considered by the claimant’s council as noted by attorney Heatherly in Trial:

A client’s character is perennially cited as one of the most critical factors at trial. Communicating character to an insurance adjuster in a demand package is difficult. However, photographs and accounts of a client’s praiseworthy personal and social activities are of great help, giving the opposition a better first impression than simply identifying the client as “a 24-year-old male carpenter.”

On the other hand, in assessing the value of a claim, don’t overlook a client’s downside. The defense will surely bring up any negatives if the case goes to trial.

You should also assess the defendant’s presentability. If he or she was intoxicated, driving recklessly, or is simply a poor witness, the insurance company will be less enthusiastic about challenging your claims regarding liability and the mechanics of the accident. (Heatherly, 1995)

As can be seen from Heatherly’s observations of these data points, they contribute to the overall ability to negotiate a claim successfully. When combined into a trusted whole they provide the adjuster the ability to negotiate from a position of confidence and strength.

Close

Insured’s (and claimants) judge insurance companies through only one prism – how they handle claims. Ensuring that claims are handled fairly and consistently is a key element to a company’s reputation and survival.

For claim adjusters trustworthy, accurate data, formulated consistently across the organization is a pre-requisite to ensuring their confidence during the negotiation process. When adjusters have faith and trust in the data that they are using, they can negotiate settlements confidently – to the right end. This will in turn enhance the organization’s reputation among its employees, its competitors, its customers and the public at large.

Benton, Mikel (June 1999): p90: Adjuster’s Repertoire Should Include Negotiation. Claims

Heatherly, Michael J. (August 1995): p58(5): Negotiating From Strength: Sure Steps Toward a
Settlement. Trial – published by the Association of Trial Lawyers of America

USLegal – definition of Principled Negotiation. Retrieved from:
http://definitions.uslegal.com/p/principled-negotiation

(CC) October 2010 Vatti-Manhattan Group
This article may be copied and distributed freely provided that you keep this copyright notice intact and is provided for free and without charge. We have to the best of our knowledge abided by all copyrights, trademarks and quoted material. Any comments, omissions, misuse concerns etc. regarding the use of trademarks and copyrights should be directed to info@vatti-manhattangroup.com.

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